What are the current trends regarding FDI in the world economy?
Investing directly in facilities to produce or market a product or service in a foreign country has become increasingly popular in the last decades, outgrowing both world trade and exporting. The main arguments for the increasingly trendy
FDI's are following:
- Fear of protectionist pressures
Despite lowering of trade barriers, firms still fear that governments will install new barriers to prevent trade. Therefore, FDI is a great way of avoiding these future uncertainties, as FDI is located inside the country borders.
- Political and economic changes
The shift toward free market economies and democracy encourages FDI. Many countries have also taken on multiple programs to increase economic growth, deregulation and privatization to open up to foreign investors.
- Globalization of world economy
Has had a positive effect on the volume of FDI → many firms see the world as their market, and undertaking FDI is to ensure their significant presence in as many locations as possible.
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